An employee is entitled to redundancy pay if you terminate their employment because:
- you no longer require the job that was done by the employee to be done by anyone (except where this is due to the ordinary and customary turnover of labour); or
- you, or your business, become insolvent or bankrupt.
The entitlement to redundancy pay is contained in the National Employment Standards (the NES). For further information on who is entitled to redundancy pay, what the entitlement is and how it applies to small businesses, visit Payment of redundancy.
For cases of genuine redundancy, a template letter of termination due to redundancy is available below.
The Cleaning Award has further provisions about redundancy, covering employees who leave during a period of notice, a job search entitlement and when an employee is transferred to lower paid duties because of redundancy. See clause 14 of the Cleaning Award for further information.
If your employees have not been offered suitable alternative employment (further information below), they must be notified in writing and the notice must contain details of the entitlements they are to be paid (such as annual leave, redundancy and long service leave) and a ‘statement of service’ or letter specifying:
- the amount of time the employee worked for your business
- the hours that they worked
- their classification under the Cleaning Award, and
- the shift configuration - i.e. night shift or day shift.
The requirement to notify your employees that a contract they are working on is due to expire, or has been terminated, 28 days before it ends is not notice of termination. If your employees are being made redundant as a result of the contract ending, you must also provide them with the correct amount of notice of termination and this will be based on the amount of time that they have been working for your business. If you don’t, you may need to pay them instead of giving them notice.
An employee is not entitled to redundancy pay if you can find suitable alternative employment for them. They are also not entitled to redundancy pay if they are employed by the incoming contractor. If your employee is employed by the incoming contractor, then you must pay them all of their accrued entitlements, such as wages and annual leave - but they are not entitled to redundancy pay.
Best Practice Tip
Whether a job is ‘suitable alternative employment’ depends on a number of factors:
- Pay - is the amount the employee will be paid for the new job similar or the same as the redundant position?
- Hours of work - is there a change of starting and finishing times, a change from shiftwork to day work (or vice-versa) or a change of the days of work? You should also consider any other responsibilities the employee has such as family or carer responsibilities.
- Employment category - is the new position the same category as the redundant position (casual, part-time or full-time)?
- Seniority or status - is the new position the same level as the redundant position - for example the offer of a non-managerial role to a manager may not be suitable.
- Skills & qualifications - does the employee have the required skills for the new position? (If not, you may have to provide the necessary training to gain the skill or qualification).
- Location - if there is a relocation of work, make sure you give thought to the amount of notice you provide the employee, transport facilities and the amount of additional time that they will have to travel to the new location.
- Fringe benefits - the overall impact of the new position compared to the redundant position, including provision of transport or a vehicle, penalty or shift rates or regular overtime payments.
- Job security - for example, offering casual employment to a full-time ongoing employee reduces their job security.
Transitional provisions under the Cleaning Award
Before 1 January 2010, your employee may have been covered by a pre-modern award (the instrument that applied to your employees before 1 January 2010) that provided more generous redundancy entitlements than those in the NES. If such an employee is made redundant any time before 31 December 2014, they are entitled to the higher amount. A summary of obligations based on some of the pre-modern awards is covered in the table below.
||Building Services (Victoria) Award 2003
||Cleaning (Building and Property Services)(ACT) Award 1998
||Cleaning Contractors (Hygiene and Pollution Control) Industry (Northern Territory) Award 2003
|New South Wales
||Cleaning and Building Services Contractors (State) Award
||Call the Fair Work Infoline - 13 13 94
||Contract Cleaning Industry Award - State 2003
||Call the Fair Work Infoline - 13 13 94
||Caretakers & Cleaners Award
||Contract Cleaners Award, 1986
||Cleaning and Property Services Award
If your redundancy obligations come from the pre-modern award that applied to your business, click on the award title and look up the specified clause to find out what you need to pay your employee.
If you are not sure which pre-modern award applied to your employees, you can use Award Finder, or Contact us.
Adam is a full-time contract cleaner employed by Shines ‘n’ Sparkles Pty Ltd in Queensland. Adam has been working for the company for 10.5 years. On 1 February 2010 Shines ‘n’ Sparkles Pty Ltd decides that Adam’s position is no longer required to be performed by anyone else and is unable to offer Adam alternative employment. Adam’s employment was covered by the Contract Cleaning Industry Award - State 2003 prior to 1 January 2010. From 1 January 2010, Adam’s employment was covered by the Cleaning Services Award 2010 and the National Employment Standards (NES).
Adam is subsequently terminated and paid out all outstanding wages, annual leave and redundancy pay.
The Contract Cleaning Industry Award - State 2003 provides for 14 weeks’ redundancy pay and the NES provides for 12 weeks’ redundancy pay.
Adam would be entitled to 14 weeks of redundancy pay, as this provides a greater entitlement.